Manufacturing Practices and Strategy Integration: Effects on Cost Efficiency, Flexibility, and Market‐Based Performance

TLDR

Manufacturing plant managers have sought performance improvements through implementing best practices discussed in World Class Manufacturing literature, yet the linkages between practices and performance remain incomplete. This study seeks a more complete theory, proposing that strategy integration and enhanced manufacturing capabilities such as cost efficiency and flexibility mediate the effect of practices on performance. Hypotheses are tested using data from 57 North American manufacturing plants that are past winners and finalists in Industry Week’s “America’s Best” competition. The results show that strategy integration strongly creates manufacturing cost efficiency and new product flexibility capabilities, moderates the effects of various practices on these capabilities, and that these capabilities mediate the influence of strategy integration on market‑based performance, offering implications for practice and future research.

Abstract

ABSTRACT Manufacturing plant managers have sought performance improvements through implementing best practices discussed in World Class Manufacturing literature. However, our collective understanding of linkages between practices and performance remains incomplete. This study seeks a more complete theory, advancing the idea that strategy integration and enhanced manufacturing capabilities such as cost efficiency and flexibility serve as intermediaries by which practices affect performance. Hypotheses related to this thesis are tested using data from 57 North American manufacturing plants that are past winners and finalists in Industry Week's “America's Best” competition ( Drickhamer, 2001 ). The results suggest that strategy integration plays a strong, central role in the creation of manufacturing cost efficiency and new product flexibility capabilities. Furthermore, strategy integration moderates the influences of product‐process development, supplier relationship management, workforce development, just‐in‐time flow, and process quality management practices on certain manufacturing capabilities. In turn, manufacturing cost efficiency and new product flexibility capabilities mediate the influence of strategy integration on market‐based performance. These findings have implications for practice and for future research.